Indian Logistics Sector: Fastest Growing and Transforming Service Sector of India

Indian Logistic

Indian Logistics industry has grown substantially in the past few years. Demand for logistics services has risen sharply due to increasing trade, investment and e-commerce activities in the country. Comprising of 13% of India’s GDP, the sector provides livelihood to around 22 million people in the country.  Currently, Indian logistics industry is estimated to about USD 160 billion market and is expected to reach USD 215 billion in the next two years. Industry is very wide comprising of around 200 shipping agencies, 129 ICD’s, 168 CFC’s, 36 logistics services and many supporting banks and insurance agencies. Indian Logistics Industry has recently seen major transforming reforms like Goods and Services Tax, which is expected to boom the industry performance in the couple of years to come. With the government efforts like improvements and growing investments in the logistics infrastructure, Make in India, training of logistics professionals, development of ‘National Logistics Portal’, etc. India’s position in the World Bank’s Logistics Performance Index (LPI), has move up from 54 in 2014 to 35 in the year 2016. Indian government is spending a lot for the infrastructure development of logistics sector in the country mainly on the maintenance and development of railways, roads and ports.

Logistic Services

Components of Indian Transport/Logistics Services

Broadly, the transport sector comprises of road transport, railways, air and water transport. If we talk about the logistics services, it is concerned with the movement of end-product to the right customer, in the right quantities and at the right time. Logistics is a much broader concept then transport services comprising of warehousing services, inventory management, freight forwarding and packaging as well. India is also outsourcing many logistics services like warehousing and freight forwarding services to many foreign firms doing business in India. In fact, Indian warehousing Industry is growing very fast and is expected to increase by 57% from 2014 to 2020. The major growth drivers of Indian Logistics services includes the improvements in the technological and physical infrastructure, rising foreign direct investments in Infrastructure, exports, government policy support, etc.

Indian railways transport network is 3rd largest in the world after US and China. With a coastline of 7517 km, India is the 16th largest maritime country in the world. Around 95% of India’s trade by volume and 70% by value is done through maritime transport.

Indian roads networks is also one of the largest across the world spanning over 5.5 million kms and Government of India is expecting to build 200,000 km of National Highways by 2022.

Air transport sector of India has been flourished like anything. India is the 3rd largest domestic civil aviation market and 9th largest civil aviation market in the world and is expected to become world’s 3rd largest aviation by 2020 and largest by 2030.

Future Ahead

As per research reports of CRISIL, KPMG and many other reputed research companies, the future is even brighter for the Indian logistics industry. Indian Logistics Industry which is stood at Rs 6.4 trillion in the FY17 will reach Rs 9.2 trillion by FY20. Indian Government of taking all necessary actions to support the growth of the sector. With huge investments in the sector, Government of India is aiming to bring down the current cost of logistics of around 14% of GDP to 10% of GDP in the next 3-4 years.

More strategic investments and policy initiatives by Indian government will prove to be highly crucial for the sector at the same creating employment opportunities in the country and overall economic growth.

Leave a Reply